When managing partners start to talk about ways to increase a firm’s income, one of the first things they think of is reducing overheads.
However, while cutting costs can play a role in improving margins, to focus solely on this means firms can run the risk of missing out on embedding efficiencies into daily practice for the long term. Similarly, often the pressure of generating more revenue means that many professionals simply put in longer and longer hours. And while this might be effective for a while – the reality is that this is just not sustainable.
Smarter legal practices are taking quite the opposite approach, and are in fact looking at investing in technology rather than cost-cutting measures as a means to drive firm-wide profit.
Interestingly, this approach is largely being driven by small to medium tier law firms, which are often more fleet-of-foot than their national or international counterparts. However, regardless of how large your practice is, any investment has to be justifiable and able to demonstrate a meaningful return. To this end, here are three of the key areas we have identified at Thomson Reuters that have the potential to drive the most efficiencies within a firm.
1) Smarter legal research
The increase in digital and online information sources, as well as evolving information consumption habits, for example, usage of tablets and smartphones, mean that our reliance on the printed page is becoming less important. As a result, the amount of space dedicated to a traditional legal library is in decline, while the job of the library – and librarian – is increasingly evolving into that of ‘Knowledge Manager’, with a strong IT focus. It is important for professionals to embrace and understand the positive implications of this trend. For a start, this includes major cost savings. Less paper (which includes practice notes and filing) means that technology can offer other options in terms of saving expensive real estate. And with office square footage only set to increase across city centres in Australia that can only be a good thing for a firm’s bottom line.
Similarly, this information revolution also brings with it changing working practices when it comes to the legal research process, and lawyers look to online research platforms and eBooks, as well as integration with practice management technologies. Consequently, lawyers are able to work much more efficiently with functionality such as advanced and intuitive search filters to find information more efficiently. The research process can become a much more collaborative process, with the ability to set up shared folders within research platforms. The end result is that lawyers are able to access information directly and efficiently from home, the office or court, in turn saving time and money.
2) Better calculating billable hours
Our own customer insight* shows us that many firms are still manually tracking their fee earner’s billable time, with more than half (56%) admitting to generally underestimating their hours. Just 18% of firms said they fully automated the process when it came to tracking hours with the average inaccuracy emerging as between 30% and 40%. With a typical charge rate of $300 per hour for a senior solicitor, firms could be looking at a lost revenue of up a potential $20,000 a month based on the average inaccuracy of 40%. This means there is some serious billable time being lost, something many small and medium firms can ill-afford.
Practice management systems can help address this issue and more. Most systems come equipped with a variety of sophisticated time recovery tools, allowing fee earners to track their hours more accurately, resulting in significantly improving the capture of billable time. A large number of legal professionals still rely on ‘manual’ processes for day-to-day tasks, despite fully automated computer based processes being available such as workflow management, client cost-ledger, and document management plus integration with research platforms. This approach also has the added benefit of reducing the associated admin-heavy requirements placed on professionals, meaning up to an average of 50%* time savings when compared with the manual process.
3) Embracing automated document production and workflows
Another opportunity for small to medium law firms is to make use of the wide range of automated document production solutions and workflows. Streamlining these processes can have a direct impact on a firm’s profitability too.
Take document assembly; on average, taking instructions and drafting one of three types of common legal documents takes around 86 minutes**. An average of 50%* can be saved when using an automated document solution, saving 43 minutes. Think of the other tasks that could be carried out in that time instead.
Legal Workflows are being implemented by more and more firms to help conduct legal work more efficiently and effectively. Checklists, precedents, flowcharts and decision trees guide practitioners with interactive tools to ensure that no steps are missed and that tasks are accurately completed. Tasks can be delegated to junior staff with the confidence that they can be guided through the relevant steps using the workflow tools while freeing up the time of senior lawyers to work on more complex areas of the law.
We’ve focused on just three areas here, but the important point is that driving profit should not be about cost cutting. There is a compelling case for law firms to look towards technology as a means to deliver significant time, and therefore cost savings. And this doesn’t necessarily need to mean a huge investment either.
*According to Thomson Reuters research conducted in 2014
**According to a 2011 study by LegalFutures